In the new issue of Regulation, economist Pierre Lemieux argues that the recent oil price decline is at least partly the result of increased supply from the extraction of shale oil. The increased supply allows the economy to produce more goods, which benefits some people, if not all of them. Thus, contrary to some commentary in the press, cheaper oil prices cannot harm the economy as a whole.

Two long wars, chronic deficits, the financial crisis, the costly drug war, the growth of executive power under Presidents Bush and Obama, and the revelations about NSA abuses, have given rise to a growing libertarian movement in our country – with a greater focus on individual liberty and less government power. David Boaz’s newly released The Libertarian Mind is a comprehensive guide to the history, philosophy, and growth of the libertarian movement, with incisive analyses of today’s most pressing issues and policies.

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Tag: american enterprise institute

With the Common Core – national curricular standards in English and math – having been adopted by 45 states, it seems Core supporters’ heads might be getting a bit big. Or, at least, they are starting to more openly express their feelings that Core opponents are very small. Like “little people” who pay taxes small.

The reputed Leona Helmsley quote is, actually, highly apropos for the view expressed by Mitchell Chester, education commissioner for the state of Massachusetts, at a recent AEI conference on implementation and governance of the Common Core. At the end of a session in which, alas, there was a fair amount of contempt expressed for supposedly conspiracy-theorizing Core opponents, Chester gratuitously threw in a small diatribe excoriating anyone who would object to the Core based on its cost. Keep in mind, reasonable estimates of the cost of fully bringing on Common Core hit as high as $16 billion.

Start at the 1:10:00 mark to hear Chester say, essentially, if it will help kids, people simply have no “right” to object to the Common Core based on costs:

Chester may, indeed, think that only the little people pay taxes, or at least only very small people would care how tax dollars are spent if spending is supposed to help “the children.” Of course, that’s much easier to feel when you are using other people’s hard-earned money. It’s far less painful to act like any decent person would be above worrying about something as pedestrian as cost when you are not the one getting hit with the $16 billion bill.

Alas, this was not the only contempt expressed by Core supporters at the conference. Playing on comments made in Mitchell Chester’s panel suggesting that Core opponents were weaving ridiculous conspiracy theories, such as the United Nations using the Core to take over the country, in the subsequent panel Chester Finn, President of the Thomas B. Fordham Institute, responded to my fears that the federal government would take responsibility for enforcing the Core by flippantly saying the U.N. or OECD would do it. Start at the 36:10 mark to catch my comments and Finn’s dismissive, evasive response:

That’s right, forget Race to the Top, NCLB waivers, federally selected and funded tests – oh, and the Obama Administration’s NCLB reauthorization proposal, which put national standards at its accountability core – and stop with all the “federal control” falderal! Heck, even forget Finn’s own writing on this!

Common Core opponents, you are very small people. But even you deserve much more openness and seriousness than some Common Core supporters appear willing to give you. After all, your money – and your children – are wrapped up in this, too.

The authors argue that because of the “rising consensus” that a preemptive attack is unappealing, and that sanctions likely will fail, they recommend “a coherent Iran containment policy.” That approach entails, among other things, that America “work toward a political transformation, if not a physical transformation, of the Tehran regime.” Leaving aside the fact that Washington has already once “physically transformed the Tehran regime” – when alongside the British it overthrew Iran’s democratically elected prime minister in 1953 and restored the Shah – there is a broader problem that comes with listening to proponents of the calamitous decision to invade Iraq.

More credible voices suggest otherwise. The nonprofit Arms Control Association (ACA) observed that the most-recent IAEA report suggests “[I]t remains apparent that a nuclear-armed Iran is still not imminent nor is it inevitable.” Iran was engaged in nuclear weapons development activities until it stopped in 2003, and as Cato’s Justin Logan observes, the IAEA’s own report shows there is no definitive evidence of Iran’s diversion of fissile material.

When Pletka was called out for her “less than a year” prediction, she turned up her nose and snapped:

Quibblers will suggest that there are important “ifs” in both these assessments. And yes, the key “if” is “if” Iran decides to build a bomb. So, I suppose when I said “less than a year away from having a nuclear weapon,” I should have added, “if they want one.” But… isn’t that the point? Do we want to leave this decision up to Khamenei?

Confronted with ambiguous information, and forced to infer intentions, hawks evince the very same arrogance and overconfidence that helped open the door for Iranian influence in the region in the first place by toppling Saddam Hussein’s regime (Pletka advocated repeatedly for this leading up to the 2003 invasion). Pletka and others who years ago had the gall to argue that Iraq “will end when it ends” are today worthy of being ignored on Iran.

It’s probably never wise to inject oneself into the middle of a food fight, but since I think both sides actually have something right and something wrong, its been a worthwhile debate to follow. That is the ongoing debate between Peter Wallison at the American Enterprise Institute and David Min at the Center for American Progress (at least we can all agree we love America) on the role of Fannie Mae (and Freddie Mac) in the financial crisis. If you can’t guess, Peter says Fannie/Freddie caused the crisis, David says they didn’t.

David makes an interesting point, one I’ve actually argued, in his latest retort. That is, this wasn’t exclusively a housing crisis/bubble. Other sectors, like commercial real estate, boomed and then went bust; other countries, with different housing policies, also had bubbles. True from what I can tell. I will also add that the U.S. office market actually peaked and fell before the housing market, so we can safely say there wasn’t contagion from housing to other parts of the real estate market.

But the problem with this argument, at least for David, is that it undercuts the Dodd-Frank Act, which he has regularly defended. The implicit premise of Dodd-Frank is that predatory mortgage lending caused the crisis, so now we need Elizabeth Warren to save us from evil lenders. But how does predatory lending explain the office market bubble? Do we really believe that deals between sophisticated parties, poured over by lawyers, were driven by predatory lending practices? Do we also believe that other countries were also plagued by bad mortgage brokers? Again, I think David is right about the problem being beyond housing, but he can’t have it both ways.

What is the common factor driving bubbles in commercial real estate, housing, and foreign real estate markets? Maybe interest rates. This was a credit bubble after all. Especially since the Fed basically sets interest rate policy for the world. It is hard for me to believe that three years (2002–2004) of a negative real federal funds rate isn’t going to end badly. This is what I think Peter misses, the critical role of the Federal Reserve in helping blow the bubble. But Dodd-Frank does nothing to change this.

Now there are a ton of things I think both still miss. We could argue all day about what a subprime mortgage is. I think the definitions used by Wallison (and Pinto) are reasonable. There is also a degree, a large one, to which David and Peter are just talking past each other. For instance, there is something special about the U.S. housing market that transfers much of the risk to the taxpayer. In contrast, the bust in the office market didn’t leave the taxpayer to pick up the tab. That has to count for something, unless one just doesn’t care about the taxpayer.

There are a few other issues that make Fannie/Freddie uniquely important in the crisis, but I lack the space to go into them here. Instead, I’ll wrap up by saying that their role in the overnight repurchase (re-po) market is under-appreciated and their ability to essentially neuter the Fed was critical in keeping the bubble going. What’s for dessert?

As David Boaz notes below, a few blocks away at 17th and M, the foreign policy and defense analysts at the American Enterprise Institute have discovered a threat that’s even more disturbing than the possibility of a Chinese “Space Force” armed with particle-beam weapons [.pdf]. It seems there’s a spectre haunting America–the spectre of “isolationism.”

It’s such a threat that AEI, one of our leading conservative think tanks, is calling on President Obama to man the bully pulpit and use his magic rhetorical skills to raise awareness. I did a double-take on Tuesday when I saw a post at AEI’s blog titled, “With Growing Isolationism, We Need Obama to Lead Now More Than Ever.” And yet, when I got up the next day, I heard AEI veep Danielle Pletka on NPR, lamenting “Republican isolationism” and the fact that Obama hadn’t yet stepped up to “explain to the American people” the “tough, important decisions” he’d made in foreign policy.

What’s the evidence for this supposedly burgeoning “isolationism” in the Republican party and the country at large? AEI’s Alex Della Rocchetta cites a recent poll showing that only 26 percent of likely voters support Obama’s Libyan adventure and the Pew Center survey David links to below, that has a rising number of Americans agreeing with the statement that the US should “mind its own business internationally.”

But is it “isolationism” to doubt the wisdom of bombing Libya, a country that the president’s own secretary of defense admits isn’t “a vital interest of the United States” or to think minding your own business abroad is better than minding other peoples’ business? As my colleague Justin Logan has pointed out, “isolationism” has always been a smear word designed to shut off debate. Tim Carney’s sardonic definition has it right: “Isolationist: n. Someone who, on occasion, opposes bombing foreigners.”

Maybe GOP pols are beginning to catch on that, for quite some time now, ordinary Americans have overwhelmingly rejected the globocop role forced on them by liberal and conservative elites. Indeed, there’s a huge disconnect between the foreign policies Americans favor and those the Beltway Consensus delivers. Nearly three-quarters of the American public wants to get out of Afghanistan yesterday; meanwhile, 57 percent of National Journal’s “National Security Insiders” think we need to waste more blood and treasure on armed “community organizing.”

It’s almost like there’s a “culture war” going on, but not one of the usual God, Guns, and Gays variety. On one side, you’ve got the sound, mind-your-business instincts of the American people; on the other, there’s a gaggle of intellectual elites, determined to extend the reach and power of the American state. A “Battle,” if you will. You could write a book about it.

The New York Times recently ran a story portraying the Gates Foundation as the puppeteer of American education policy, bribing or bullying scholars and politicians into dancing as it desires. Rick Hess, of the American Enterprise Institute, feels that the story misrepresented his position on the potentially corrupting influence of foundations, making it sound as though he were referring to the Gates Foundation in particular when in fact he was referring to the impact of foundations generally.

Hess told the Times, among other things, that

As researchers, we have a reasonable self-preservation instinct. There can be an exquisite carefulness about how we’re going to say anything that could reflect badly on a foundation. We’re all implicated.

Next Monday, the Cato Institute will publish a study titled: “The Other Lottery: Are Philanthropists Backing the Best Charter Schools?” In it, I empirically answer the titular question by comparing the academic performance of California’s charter school networks to the level of grant funding they have received from donors over the past decade. The results tell us how much we should rely on the pairing of philanthropy and charter schools to identify and replicate the best educational models. Considerable care went into the data collection and regression model. As for the description of the findings, it’s as simple and precise as I could make it. I doubt it will be hailed as exquisite.

There has beenanon-goingdiscussion recently about the Tea Party’s foreign policy views and how this might influence the upcoming election and new members of Congress. In an essay at the Daily Caller last week, the Heritage Foundation’s Jim Carafano addressed this question and the claim that the new “Defending Defense” initiative— led by Heritiage, AEI, and the Foreign Policy Initiative—is aimed at co-opting the Tea Party movement (for more on the substance, or lack thereof, of “Defending Defense,” see Justin Logan’s response here).

Over at The Skeptics blog, I take issue with Carafano’s assessment of the Tea Party’s foreign policy views:

With respect to Carafano’s assessment of the Tea Partiers’s views on foreign policy and military spending, most of what he puts forward is pure speculation. Little is actually known about the foreign policy views of a movement that is organized primarily around the idea of getting the government off the people’s backs. It seems unlikely, however, that a majority within the movement like the idea of our government building other people’s countries, and our troops fighting other people’s wars.

Equally dubious is Carafano’s claim that the Tea Party ranks include “many libertarians who don’t think much of the Reagan mantra ‘peace through strength’ ” but an equal or larger number who are enamored of the idea that the military should get as much money as it wants, and then some. Carafano avoids a discussion of what this military has actually been asked to do, much less what it should do. By default, he endorses the tired status quo, which holds that the purpose of the U.S. military is to defend other countries so that their governments can spend money on social welfare programs and six-week vacations.

Tea Partiers are many things, but defenders of the status quo isn’t one of them. This movement is populated by individuals who are incensed by politicians reaching into their pockets and funneling money for goo-goo projects to Washington. It beggars the imagination that they’d be anxious to send money for similar schemes to Brussels, Paris, Berlin and Tokyo, and yet that is precisely what our foreign policies have done – and will do – so long as the United States maintains a military geared more for defending others than for defending us.

Like other radicals, however, they are pretty good at politics, which is clear from reading their latest offering, a talking points document [.pdf] produced by the “Defending Defense” initiative intended to demonstrate that U.S. military spending is not that large and should not be cut.

I have several things to say about the document, but all of the internet sniping and providing adversarial quotes to journalists probably aren’t the best way to adjudicate the debate. To that end, on behalf of my colleagues I extend the offer of an open, public, live debate to the Defending Defense people: Let’s debate the security of the United States, the strategy to best protect it, and the resources needed to fund the strategy. Any time, any place.

The overarching problem in this debate is that the big spenders keep inserting the red herring of defense expenditures as a percentage of GDP into the debate. This is relevant only as it pertains to their claim that “current levels of defense spending are affordable,” but last time I checked the mere fact that something wouldn’t, in itself, bankrupt the country is not a sufficient conservative justification for a government program.

The logic of basing the military budget on a percentage of GDP would imply that security and economic growth are inversely related. Of course, the simple fact is that economic growth does not pose a threat to the United States and economic contraction does not make us safer. During World War II we spent roughly 40 percent of GDP on our military, and given where we were, that seems sensible to this analyst. But the “given where we were” part of that sentence is doing a lot of work. Where are we today? What are the threats we face? How should we deal with them? How much would it cost to do so? Answers to those questions should provide the grounding for our military budget, not the deeply unconservative justification that “it won’t bankrupt us.”

Another point: It might sound pedantic, but many of what they characterize as “myths” can’t be myths. They might be wrong. They might be poor analytic points. But they can’t be “myths.” To correct just a few of what they call “myths”:

“Pentagon budgets were a “gusher” of new money in the Bush Administration.”
- A metaphor can’t be a myth.

“The United States should not be ‘the world’s policeman.’”
- Preferences aren’t myths.

Myths are mistaken empirical claims that people believe, or the stories surrounding mistaken empirical claims that cause people to believe them. For example, lots of people think President Obama signed the TARP. That’s a myth. President Bush did it. The way the neoconservatives are using the word “myth” in the document is something more like “argument I disagree with.”

But let’s take these “myths” one by one and have a look at the analysis.

1) “Additional defense spending is unnecessary as the United States already spends more on defense than half the world combined.”

Interestingly, the authors nowhere argue that additional military spending is necessary, although they strongly imply that it is. In 2005 Tom Donnelly and Gary Schmitt wanted 5 percent of GDP to go to defense, which today would be roughly $730 billion. It wasn’t clear whether they wanted to keep the supplementals going with the 5 percent comprising just the base budget, but with the wars we’re already spending roughly $730 billion on the military as it is. (Also, just a factual correction, the best estimate is that we spend just under what the rest of the world spends combined, not just over.)

The authors also spirit in a normative claim in the first sentence to fend off scrutiny: “No other country in the world has the enduring vital national interests of the United States, and therefore the U.S. military has global reach and responsibilities.” Given the weight hung around this claim, it would have been good if the authors could have offered even a superficial defense of it. They did not.

2) “Pentagon budgets were a ‘gusher’ of new money in the Bush Administration.”

Again, “a gusher” is in the eye of the beholder. For facts, you should turn to the study authored by my colleagues Ben Friedman and Chris Preble. There they point out that U.S. military spending has risen by 50 percent over the last 12 years, not including inflation or the wars. If you include the wars, U.S. military spending has increased by more than 80 percent since 1998. Military spending constitutes 23 percent of the federal budget. That’s real money where I come from.

3) “Cutting waste and excess from the Pentagon budget will provide sufficient funds to make up for shortfalls.”

Depending on whether we change our grand strategy, this is definitely true. Our foreign policy is insolvent today. Given our commitments, defense spending is too low, but the commitments are the problem. We could spend less with fewer commitments and still be safe.

4) “Current levels of defense spending are unaffordable.”

Even though the rhetoric the authors assemble to knock down this claim isn’t very good, I agree with them. (I agree based primarily on Stephen Brooks and William Wohlforth’s excellent book, which makes a strong case that the United States can afford a massive military budget.) Big, fabulously wealthy countries like ours can afford to do lots of expensive things, like Medicare Part D or funding a chunk of the defense of Europe, Japan, South Korea, and Israel ourselves. But it doesn’t mean we should, necessarily.

5) “The United States should not be ‘the world’s policeman.’”

Again, this is a preference, not a myth. But the authors’ central defense of the implied claim that we should be the world’s policeman comes in the argument that “the cost of preserving America’s role in the world is far less than would be the cost of having to fight to recover it or, still greater, the cost of losing it altogether. While many Americans would prefer to see our allies and partners play a larger part in securing the blessings of our common liberty, no president of either political party has backed away from America’s global leadership role —a bipartisan consensus that remains strong evidence that American leadership is still necessary to protect the nation’s vital interests.”

This argument, in turn, is based on an unstated theoretical premise, which is that when America isn’t somewhere, all hell breaks loose, and that when all hell breaks loose, it tends to land on our heads. The balance of power doesn’t work, we live in a bandwagoning world not a balancing world, and therefore if we aren’t everywhere, chaos will be, and if chaos is everywhere, it’s going to hit us eventually.

This might be a surprising area of agreement, but as someone who has long thought that the wars we’re in are dumb (and deeply unconservative), I believe strongly that focusing our defense dollars on winning the wars we’re in is a dumb idea.

Again, though, there’s lots left to discuss, so let’s hope AEI, Heritage, or the Foreign Policy Initiative will agree to a debate.